Keep track of comps

Personal Finances Buying or Selling a Home
1

I continue to keep track of comparable properties that come on the market in the area of any properties I own. Some Realtors take umbrage at this, one of them even telling me that was my agent’s job not mine. (Yeah, not hiring her ever.) Am currently interviewing agents for a property I am looking to sell. First one came in at $560K. Today’s came in at $425K. If you don’t know your market, how will you know who is right? The first agent is my buyer’s agent and she knows to do her research in a big way with me. The second started with you paid this…Irrelevant. What do you think it should be…Not pertinent, I want to get your data based professional opinion without influencing it. When he showed me his comps I was able to say you missed these recent sales which are more comparable. He went home to do his homework and I will listen a second time. May be a waste of time but the guy is a friend of a friend, a broker and owns his own business!

It’s insane to me how many “well respected” Realtors have no clue how to do comps properly. Educate yourself to evaluate the data properly and know your comps so you know how accurate theirs are.

IP,
having done this before with the same results, setting her own price and selling it herself

1 Like
2

I live in a development with 120 houses in about four models. I try to keep up on selling prices of any of them each year. Recent selling prices are the best indicator of value. But over time some add extras and some are better maintained. Some are on corners. Some back to major streets. Some have larger lots. Some have finished basements. Some have walk out basements.

Asking price has to consider all aspects.

Zillow used to make tracking recent sales easy. Now they feature estimated value and hide most recent selling prices but its there when you look closely.

3

I live in a development with 120 houses in about four models. I try to keep up on selling prices of any of them each year. Recent selling prices are the best indicator of value. But over time some add extras and some are better maintained. Some are on corners. Some back to major streets. Some have larger lots. Some have finished basements. Some have walk out basements.

Asking price has to consider all aspects.

Absolutely, which is why I keep a file on recent comps and often even go through the property either with our Realtor or an open house, noting special features that are not in the listing as well as any impressions. That said, specific features can be added in. For example the house we are looking at selling has an attached garage, which is unusual in our city. That doesn’t mean you only look for comps with an attached garage, but you add in the value of the garage or the fireplace, etc, on to or off of the comps that have extra features or missing some. And you are talking minor adjustments, whereas the difference in suggested list price is $135K! From a $/sq ft angle, the $560K price is merited for our area at about $230/SF. The $425K is below $175/SF. That’s a crazy difference. Plus the broker who gave me the low list price focused on irrelevant things like what we paid, what the tax assessment was, what was currently listed in the neighborhood, (properties I had been in and he had not, my having first hand knowledge that they were fixer uppers with water issues and in one case significant structural issues,) having missed many of the recent sales in presenting comps. My knowing what had sold in the neighborhood and for how much clued me in that he was needing to do more homework. He said he would go back and re-run the comps without the neighborhood name as a search item, since the listing agent of the recent sales may not have included that in their listing. I also clued him in that a Realtor that was popular in our area often pulled the listing as Off the Market when in reality it had sold. I got my sales numbers from public records for those properties.

It’s critical to be aware of what is going on in your area. Search engines will only find what you tell them to look for. Realtors are specialists on the general area, you have to be a specialist on your neighborhood.

IP

1 Like
4

Zillow often had realators photos of the property at least while for sale. These do let you spot many extras like hardwood floors, walk in tubs, redone kitchen, fenced yard, deck, patio, etc. I keep notes of these details.

Of course true value is what some buyer is willing to pay. You use details to refine the estimate, but they are always approximate. Find a buyer who values your extras and is willing to pay for them.

5

Just for information purposes (coming from my experience in the mortgage industry), as many people do not understand how appraisers appraise properties:

  1. realtors love to use price per square foot, but appraisals do not focus on that.

  2. The attached garage for example - not sure if just garages in general uncommon or if it being attached and other properties in the area commonly have detached garages, but if the later; that does not equate to more value. An appraiser will give same value to an attached garage compared to a property with a detached garage.

  3. Appraisers also give general adjustments for patios, porches, pools and other add-ons that do not translate price-wise to the actual cost the owner may have paid for those improvements. For example, a deck and patio is usually given a 5k or 10k adjustment when compared to a comp that did not have that feature. An inground pool can cost 100kish but value given on appraisal only around 20k. Same with properties with acreage. You could have 20 acres and a comp could have 40 acres. An appraiser will comment on price per acre and do a downward adjustment on the 40 acre sale to come in line with the subject property. Finished basements is another item that, when compared to homes with unfinished basements only equate to a smaller adjustment than the actual cost to finish a basement.

  4. When looking at comps: if you are in an urban area, appraisers will usually look for comps within a half mile, in suburban areas up to 1 mile radius and in rural areas they can go further out. On unique properties or 1mil+ homes located in suburban areas appraisers can go outside those parameters but must notate why. And they typically look at homes sold within past 3-6mo and sometimes up to a year but not longer than 1 year. So when someone tells me there house appraised at 500k 4 years ago; it means nothing to me or an appraiser.

Just pointing these things out as many people get crazy when you tell them home didn’t appraise out. On properties with multiple offers, some buyers don’t even inform the seller about the lower value and just pay the difference. But the realtor on a low appraisal ALWAYS wants to blame the appraiser when it’s their job to give a fair analysis without emotions. I’ve had a couple of deals where my buyer backed out because of low appraisal and seller’s unwillingness to budge and that property took 3 more months to sell and ultimately sold for 100k less (in Chicago)…the same value appraiser provided. So in the end, seller lost out as I feel many sellers do not factor in the carrying costs (mortgage payment, property taxes, homeowners insurance, utility bills, and HOA fees).

Just some info for buyers and sellers.

8 Likes
6

On properties with multiple offers, some buyers don’t even inform the seller about the lower value and just pay the difference.

When I put an offer in on my house in 2020 the “owner” was a relocation company in a state far away. There was an offer behind mine, but for cash. I was going to put 20% down and have a mortgage. There was no question I could afford the mortgage, but the seller was concerned that the property would not appraise high enough for the size mortgage I wanted. They were leaning toward the lower cash offer because of that. I was able to counter that I would simply raise the down payment until it lowered the mortgage to fit the appraisal. Fortunately it appraised high enough.

1 Like
7

In a development where over 100 similar houses were built over a few years and 4 or 5 sell each year, comps are easy. Adjustments for extras vary.

Find the right buyer for your extras.

8

In a development where over 100 similar houses were built over a few years and 4 or 5 sell each year, comps are easy. Adjustments for extras vary.

Sure during a normal period in the real estate market. But when it gets crazy like it did here last year, a house sold just a few months ago is not reflective of the current market.

PSU

3 Likes
9

a house sold just a few months ago is not reflective of the current market.

Perhaps it’s more reflective of the current market and not when normalcy returns.

10

Perhaps it’s more reflective of the current market and not when normalcy returns.

That normalcy you spoke of… I’m trying to remember when that was. Can you give me a hint?

:sunglasses:

11

realtors love to use price per square foot, but appraisals do not focus on that.

The $/sf is used as a sanity check, not an appraisal tool. I think you would agree that the very same house is unlikely to have a $230/SF and a $175/SF both be true at the same time. The delta in $/SF was the result of two sales price estimates being $135,000 apart on a house that should sell in the $500K range. That’s a crazy difference any way you measure it, and why I make sure to not only collect my own data, but also to have more than one Realtor come pitch their expertise. On another house I had one realtor give me a price that stunned me, and when I asked her how she arrived at that number, she said she took the average price of the 4 bedroom houses sold (in a pretty large area.) Never mind that our house was 3500SF and some of her comps 1700SF. I sold that one myself in less than a week for about $75K more than other realtors even wanted to take the listing for. Do your own due diligence.

2. The attached garage for example - not sure if just garages in general uncommon or if it being attached and other properties in the area commonly have detached garages, but if the later; that does not equate to more value.

Garages in general are unusual, and since it is not finished square footage, it is not included in the $/SF. In the past on other houses I’ve seen a garage get you something like $6,000 added on to the price. Definitely not a reason to only look at comps with garages.

…if you are in an urban area, appraisers will usually look for comps within a half mile,…

In this city that can take you from the elite to the slums.

IP

12

Garages in general are unusual,

I’m sure you’ll agree that’s a location-dependent thing.

In my area, garages are expected, and most are attached. Two-car is the norm. A house without a garage would definitely take a price hit compared to a similar house with no garage.

As you said, you need to understand your local market. And in my local market, garages are normal. Not unusual.

–Peter

5 Likes
13

In my community, 2 1/2 and 3 car garages are common. The extra is for golf cart and/or boat.

1 Like
14

Garages in general are unusual,
…
I’m sure you’ll agree that’s a location-dependent thing.

Sure, as I stated earlier in the thread: For example the house we are looking at selling has an attached garage, which is unusual in our city. https://discussion.fool.com/i-live-in-a-development-with-120-hou…

IP

1 Like
15

Garages in general are unusual,
…
I’m sure you’ll agree that’s a location-dependent thing.

Sure, as I stated earlier in the thread: For example the house we are looking at selling has an attached garage, which is unusual in our city. https://discussion.fool.com/i-live-in-a-development-with-120-hou……

In case more hand holding is necessary, the “Garages in general are unusual” was a clarification to someone who wondered: 2. The attached garage for example - not sure if just garages in general uncommon or if it being attached and other properties in the area commonly have detached garages, but if the later; that does not equate to more value. An appraiser will give same value to an attached garage compared to a property with a detached garage. It all relates back to the first post where I talk about crazy discrepancies in placing a sales price on a property. When confused about something, clicking whole thread is a good way to figure out what information you skipped over.

IP

2 Likes
16

We went ahead with the sale of this property, not surprisingly with the agent who put serious work into the research and suggested the higher price. After 12 days from the first showing, (with several of those days having the house unavailable for tours due to tenant’s night shift work requiring sleeping during day,) we are under contract at over 97% of asking price, cash, no appraisal. $30K earnest money.

This was the first house in the neighborhood to go on the market for over $500K, resulting in quite a bit of push back from local agents. They did not believe it would have a problem appraising, but had a hard time breaking that dollar barrier in their minds. For some reason they had no problem paying $400+K on a property that required another $100K to update it, but paying over $500K for an updated larger property was a mental challenge for them. Be aware of that potential challenge if you are breaking barriers in your neighborhood.

The initial offer requested a home inspection for informational purposes only. This is intended to assure the seller that they will not be nickel and dimed over small repairs, but in truth what it offers the buyer is an ability to back out of the transaction for absolutely no demonstrable reason, leaving the sellers with a property that has been pulled from the market and now other buyers will wonder why the buyers backed out. A friend recently dealt with this in selling one of their rentals, with the information only inspection buyer coming back at them for a reduction in price based on small items. We insisted on and got our buyers to agree to an inspection where they accept the first $5K in issues, which eliminates the free pass on change of mind and avoids penny ante renegotiations. We are in a very short sales opportunity when incoming medical professionals need to find a home before their contract starts in June, and being pulled out of this market for even a short time could be catastrophic.

Great results aside, we have noticed a shift even in our crazy good market, and wonder if it indicates tougher times ahead for selling a home. More than one potential buyer asked about cost of utilities, which I would expect more on a starter home. We put together a spreadsheet of our utility costs for the last year we lived there, including a usage chart for the year so that they could see how the costs from 3 years prior would translate to today’s costs. Our Realtor noticed a significant increase in buyers getting cold feet and pulling out of contracts, though when I looked at the properties this was done on, it was mostly the starter home market. It seems pretty clear that the lower end of the market is feeling the economic pinch of rising mortgage rates and general inflation. If you are looking to sell, do so quickly. This will get worse, IMO.

With the high earnest money, no appraisal or mortgage clause and buyer’s eating the first $5K on appraisal, I do not anticipate problems, but still will sleep better when this sale closes. They get the rent from the tenants when we close, so there is a profit motivation to closing earlier for the buyers. The sooner the better for us too, since we still have some capital gains exclusion for taxes on this property, having lived there 2 out of the past 5 years. That ends mid August.

FWIW,

IP

7 Likes
17

We insisted on and got our buyers to agree to an inspection where they accept the first $5K in issues, which eliminates the free pass on change of mind and avoids penny ante renegotiations.

I like that solution. Very creative.

–Peter

18

We insisted on and got our buyers to agree to an inspection where they accept the first $5K in issues, which eliminates the free pass on change of mind and avoids penny ante renegotiations.
…
I like that solution. Very creative.

Thank you. It’s what we offer when we want to present a strong contract to buy. Always VERY well received.

IP

1 Like
19

Update on inspection:

From a previous post I wrote: The initial offer requested a home inspection for informational purposes only. This is intended to assure the seller that they will not be nickel and dimed over small repairs, but in truth what it offers the buyer is an ability to back out of the transaction for absolutely no demonstrable reason, leaving the sellers with a property that has been pulled from the market and now other buyers will wonder why the buyers backed out. A friend recently dealt with this in selling one of their rentals, with the information only inspection buyer coming back at them for a reduction in price based on small items. We insisted on and got our buyers to agree to an inspection where they accept the first $5K in issues, which eliminates the free pass on change of mind and avoids penny ante renegotiations. We are in a very short sales opportunity when incoming medical professionals need to find a home before their contract starts in June, and being pulled out of this market for even a short time could be catastrophic.

Should have worked great, right? In our case the buyers brought in “someone they know” to do the inspection. He included things in the report that were cosmetic, a no-no in our area, and escalated the “cost” of doing things to an astronomical price that defied reality. They of course then said they knew they were responsible for the first $5K, but the report showed $10-22K in issues according to their inspector and they were offering to split the last $5K with us. Keep in mind that their buyer’s agent had assured our agent as they left the inspection that “only small issues were found.” Pissed us off royally, even DH who is much more even tempered than I, with our initial knee jerk reaction to be to pull the contract and rent it out again. But we waited 4 more days until about 24 hours before the home inspection contingency had to be addressed, replying that their benefit from our work by collecting a month’s rent and the non-refundable pet fee put almost $2,700 in their pocket, which we viewed as more than enough compensation for the inspection. We had also told our agent that we would be fine with the $2500 coming out of the buyer’s agent commission, but not hers, but she felt that was not necessary to convey. The rent payment allowed them to save face.

Home inspections are becoming very aggressive, being executed in bad faith. It seems to be an emerging trend from what I am hearing from others experiences in addition to ours. Are real estate salespeople adopting the ethics of the stereotypical used car salesmen? Seems that way around here.

IP,
still on track for end of April close

2 Likes
20

In our case the buyers brought in “someone they know” to do the inspection.

Did the ‘inspector’ have any inspection credentials? Depending on your state, they may not be very hard to get https://www.homeinspector.org/Resources/State-Regulations but even if your state doesn’t regulate or license home inspectors (most do), there is a national certification offered https://www.homeinspector.org/Education/National-Home-Inspec…

He included things in the report that were cosmetic, a no-no in our area, and escalated the “cost” of doing things to an astronomical price that defied reality.

Sounds like he was a contractor who was bidding on the jobs he wanted to do, not an inspector.

Home inspections are becoming very aggressive, being executed in bad faith. It seems to be an emerging trend from what I am hearing from others experiences in addition to ours. Are real estate salespeople adopting the ethics of the stereotypical used car salesmen? Seems that way around here.

Around here, pre-inspections, paid for by the seller, are common. The sellers generally get all of the little things corrected, and may even pay for a re-inspection to show that they were corrected. Most sellers feel that the extra $400 - $600 out of pocket, plus the cost for any repairs, is more than made up for by not haggling over inspection issues. Sellers also make sure that anything pointed out in the report and not corrected is in the seller’s disclosure, which are pretty extensive around here.

When there a pre-inspection is provided, with all non-corrected issues disclosed, the inspection contingency is generally waived, although buyers may still choose to get an inspection after the offer is accepted. When a pre-inspection is provided, any offers without the inspection contingency waived generally go to the bottom of the pile.

AJ

2 Likes